LONDON: Market regulators set out a global framework on Tuesday to police environment, social and governance (ESG) investment ratings and help combat ‘greenwashing’ in the fast-growing, multi-trillion dollar sector.
Regulators are cracking down on many aspects of ESG investing with basic rules to make it easier to punish greenwashing, where the environmental credentials of an investment or activity are overstated, in a cross-border sector where investment is “exploding”.
The International Organization of Securities Commissions (IOSCO), which groups securities watchdogs from the United States, Europe, Asia and Latin America, published 10 recommendations for its members to apply in day-to-day work.
“What we are trying to do now is put this foundation in place so we have some possibility to go after greenwashing and not just talking about it,” Erik Thedeen, chair of IOSCO’s sustainable task force and director general of Sweden’s markets watchdog said.
Asset managers use ratings from about 160 raters such as MSCI, S&P Global and Morningstar to pick stocks and bonds for “green” products now popular with ethical investors, but there are no regulatory checks on how those ratings were put together.